Demographics have presented important considerations for investors for the past 100 years, and they’ll be important for the next 100 years—because much can be anticipated by looking at demographic shifts.That’s because there are two key ways to influence economic growth: via productivity and via the labor force.Improving productivity is difficult in an environment where central bank activity was preventing normal asset pricing (currently, central banks are starting to unwind some of the extreme elements of their rate manipulation). Still, when the government manipulates market prices, it inhibits corporations’ ability to properly assess capital expenditures, which is their form of investment.Because they can’t accurately determine the price they want to pay for an asset, it is difficult for companies to invest, so they sit on cash. That restrains productivity.That means we’re forced to look to the labor force for economic growth, and that is where demographics come into play. If a population isn’t growing, the labor force isn’t growing. And if the labor force isn’t growing, it’s difficult for the economy to grow.The chart below shows the projected population growth of different countries as a percentage of what it is today. For 2016, the diamond in the middle of the chart, it’s 100%. Looking back from there, you can see that population growth in emerging markets, excluding China, has been steep. The United States and Spain have also been growing relatively rapidly.

What I find more interesting is what happens from here. Germany and Japan are anticipated to experience a very significant decline in their populations. By the end of this century, if these countries maintain the same birth and death rates and maintain the same policies and migration rates, their populations will be only 40% of what they are today.Said another way, Germany and Japan have more people leaving their population (through death and emigration) than entering (through birth and immigration). That’s a difficult situation for Germany and for Japan.Just above Germany and Japan on the chart are Italy and Spain. Their situation (rapidly declining populations) is not quite as bad as Germany’s and Japan’s, but it still represents a difficult environment for growth.The United States fares better, with the population growing until about 2050. Faring best of all are emerging markets, excluding China. At the end of the century, their populations are anticipated to be above current levels.I have excluded China to provide a sense of what the population growth looks like without that behemoth’s influence. Its growth over the rest of the century will likely be slower than what you see for the other emerging markets.

I find it interesting that at the end of the century the world population will end up at about where it is today. We should see a 20% increase in population growth from now until 2050, after which it will decline.What does all of this mean? Countries with declining population growth are likely unable to provide benefits for their populations. Germany, for example, cannot maintain the social welfare contracts it has with its citizens if only 40% of its current population is working and paying taxes.For that reason, we can very confidently say that something has to change—and what is most likely to change across all of these markets is migration of people and the flow of goods, services, and capital across borders.We look for countries that are making legal and regulatory changes that allow for migration, trade flow, and capital flow, because these changes will help drive economic growth.The latter is very important because wealth is being created globally. Even if you live in a country with low population growth, you can maintain your standard of living.In fact, over the coming years, we believe we’ll see regulatory changes that integrate the 17% of the world’s population living in the developed world with the 83% of the population living outside the developed world. That 83% is younger and more capable of moving into a low-skilled labor environment. In other words, it will be providing labor, as well as goods and services, to the developed world.From an investing perspective, we look for countries that are making legal and regulatory changes that allow for migration, trade flow, and capital flow, because these changes will help drive economic growth. When those developments occur, economies typically change gradually, while asset markets tend to respond more quickly.And given that asset markets respond more quickly, we’re tracking these medium-term developments for investment opportunities where we see the free(er) flow of goods, services, capital, and labor.Singer is the Head of the Dynamic Allocation Strategies Team at William Blair, a Chicago-based investment banking and asset-management firm.

By Rodger Baker.Trade is the lifeblood of the Asia-Pacific, and even as nationalism rises, the region still sees a globalized world as a greater reward than risk. (RODGER BAKER)

Flying into Singapore's Changi Airport, one is struck by the fleet of ships lined up off shore, the tendrils of a global trade network squeezing through the narrow Malacca Strait. Singapore is the hub, the connector between the Indian Ocean, South China Sea and Pacific. Since the late 1970s, with little exception, trade has amounted to some 300 percent of Singapore's total gross domestic product, with exports making up between 150 and 230 percent of GDP. Singapore is the product of global trade, and the thriving multiethnic city-state can trace its trade role back centuries.Having arrived in Singapore from Auckland, the contrast was stunning. It's not that New Zealand isn't heavily integrated into global trade networks — some 50 percent of its GDP is based on trade, and since its early days as a British colony it has been heavily dependent on distant trade partners. But whereas Singapore sits at the center of trade flows, New Zealand is at the far fringes, a remote outpost that has come to represent the leading edge of free trade agreements and calls for globally agreed-upon trade rules.Given the significance of trade to the two, it is perhaps no wonder that New Zealand and Singapore were both part of the P3 countries (alongside Chile) that initiated Pacific trade talks in 2002, which emerged three years later as the first iteration of the Trans-Pacific Partnership (TPP), adding Brunei as the fourth founding signatory. Only a decade earlier, in the 1990s, trans-Pacific trade had exceeded trans-Atlantic trade, marking a shift in global patterns established for several centuries. Trade is the lifeblood of the Asia-Pacific, and even with rising examples of nationalism, the globalized world is still seen here as a greater benefit than risk. Whereas colonialism was exploitative, globalism is seen as the provision of opportunity for growth and national strength.It is interesting that the theme of the "easternization" of the global system — the assertion that China is set to usurp the leadership role of an inward-turning United States — is not nearly as pronounced in the region as it is in the West. With regard to Singapore and New Zealand, one could argue that British heritage and history may play some role, but discussions with businessmen and policymakers from countries around the region seem less focused on the so-called Asian Century than on ensuring that global multilateral trade pacts remain the norm. Asia may trade primarily within Asia, but that doesn't mean it has any interest in being isolated from the rest of the world. And aside from assertions in some sectors in China (perhaps reminiscent of similar ideas espoused in Japan in the 1980s and early 1990s), there is little expectation that Asia is ready to take the lead, except perhaps in the promotion of open trade.

Growing Angst in the Asia-Pacific

Perhaps the most common theme I encountered in discussions in New Zealand and Singapore, and with individuals from around the region, was the future of the global trade environment — specifically, the implications of a potential trade war (or even a minor spat) between the United States and China. Like many countries in the Asia-Pacific, both Singapore and New Zealand have adapted to a basic post-Cold War regional status quo, one where economics center on China and regional security centers on the United States. But with the Brexit underway, the TPP gone, the United States flirting with a more nationalist rather than globalist trade policy, and China expanding its military activity throughout the region, there is growing angst that this unofficial balance will no longer be sustainable.This is particularly pronounced among members of the Association of Southeast Asian Nations (ASEAN), the 10 Southeast Asian countries (nearly all post-colonial entities) that have for decades sought to strengthen their hand internationally through cooperation and shared negotiations. Nearly a quarter of ASEAN trade is within the bloc, but better than 19 percent is with China and Hong Kong. Overall, Asia and the West Pacific account for more than 66 percent of ASEAN's total trade. Just 10 percent is with the European Union and 9.4 percent with the United States. While economics is regional, security looks abroad. Two ASEAN members, Thailand and the Philippines, are formal treaty alliance partners with the United States, and several others have established or developing defense relations. There is little real complaint from the ASEAN states (or from countries including South Korea, Japan, Australia and New Zealand) of the United States' unofficial role as guarantor of freedom of navigation in the seas in the region. But there are growing challenges with China's expanding military activity and evolving assertion of its own role as the rightful regional security hegemon.So long as China was largely seen as a beneficial trading partner and a source of investment, but fairly innocuous when it came to involvement in local politics or security, the dualistic approach toward Washington and Beijing was seen as not only acceptable, but preferential. China's economic heft balanced the United States' military heft, and vice versa. A slight sense of competition for regional friends between Beijing and Washington could be exploited to ASEAN's benefit, and even South Korea, Australia and New Zealand — close U.S. partners — saw merit to the system. China would increase its offer of preferential investments or trade access, Washington would counter with offers of more trade but also keep China's broader regional ambitions in check. This semi-equilibrium has been breaking down over the past several years, with two apparent case studies being the Philippines and South Korea.When Philippine President Rodrigo Duterte took office last year, he challenged the country's defense relationship with the United States, arguing that close ties with Washington had undermined Philippine relations with Beijing without providing security against China's occupation and construction on disputed islets. Essentially, the Philippines lost economic opportunities with China yet failed to benefit from security guarantees by the United States. It was the worst of both worlds. Duterte has since pursued a policy far different from that of his predecessor, Benigno Aquino III, who doubled down on the relationship with the United States and took a largely confrontational attitude toward China. This is not to say that Manila has simply accepted the dual economic and security role for China in the region. It continues to assert its own rights, is expanding economic and security ties with Japan, and continues to engage with U.S. military forces in the region — and in the Philippines itself.South Korea is another case study in the dualistic policy of tying the economy to China and security to the United States, perhaps more overtly than most other countries in the region. South Korea has free trade agreements with both the United States and China. A quarter of South Korean exports go to China, a number that nears 30 percent when adding in Hong Kong. This compared with 14 percent to the United States. Meanwhile, China accounts for 21 percent of South Korean imports, while the United States accounts for just 10 percent. And China's role in the overall Korean supply chain, particularly with electronics, is masked in these baseline numbers. But when it comes to defense, the balance is entirely one-sided. The United States maintains 28,500 troops on the Korean Peninsula and retains operational control of South Korean forces in the Combined Forces Command, should hostilities with the North break out.South Korea's decision to host the U.S. Terminal High Altitude Area Defense (THAAD) missile system triggered a strong outcry from China. Beijing began complaining even before Seoul and Washington entered formal discussions about the deployment, and since a decision was made it has used unofficial measures to strike at the South Korean economy. Tourism flows to South Korea have slowed, Korean cultural and entertainment exports and tours in China have been curtailed, and Korean businesses are facing boycotts, spools of red tape and bureaucratic sluggishness. Washington, in return, has accelerated the pace of THAAD deployment, hoping to complete the placement of the systems before early South Korean elections, which are likely to bring a progressive candidate to power — one who could revisit the THAAD agreement.

A Broken Consensus

With U.S. participation in the TPP off the table, and U.S. defense seen as either insufficient to address regional concerns or, going to the other extreme, exacerbating economic challenges with China, there is a growing sense throughout Asia that the United States is simply not able to be counted on as a counterweight to China, at least not for the next several years. China's expanded military capability and activity is only reinforcing these views. The consensus forming is that the status quo balance between Chinese economy and U.S. security has already broken down. China's expansion was not effectively countered, whether by the so-called U.S. pivot (or re-balance) to Asia or by U.S. engagement with ASEAN and regional trade initiatives. For many in the region, it is not a question of what they prefer, but rather an acknowledgement of the shifting regional realities. When a country the size of China begins to assert its own interests, changes to the existing regional structure are inevitable.The discussion now is about options. Simply accepting that China will be a regional hegemon is unlikely for most countries in the region. Even the Philippines, which has seen such a dramatic shift in its public policy, is looking for a balancer to China's regional power and influence, possibly in Japan. And South Korea is re-thinking its overreliance on the Chinese economy. Some countries that were in the expanded TPP are looking to maintain momentum even without the United States, hoping that together they can either shape China's economic behavior or perhaps lure the United States back into at least a modified version of the trade agreement down the road. ASEAN is pressing for the long-delayed Code of Conduct with China to try to curtail China's apparent expansionist tendencies. But few individually or together have the overall heft of the United States.In Singapore and New Zealand, two countries that have successfully navigated their dual relations with Washington and Beijing for some time, there is a fear that they may be forced to choose. If a trade war breaks out between the United States and China, it will not be only about trade; it will be about regional relationships, about interpretations of the rights of passage through the South China Sea, about the options for dealing with North Korea — in short, about the whole of Asia-Pacific stability. China is facing deep structural challenges as it undertakes the painful transition from an export-based economy to a consumption-based one, and it will consider any strong U.S. economic action to be a clear attempt to disrupt the transition and contain China. The United States sees each further step by China to assert its military capability through the South China Sea as a clear challenge to a core interest of freedom of navigation and control of the seas.Stuck between these two powers lie the Asia-Pacific countries, adapting to the changing balance of power and fearing a dramatic break in the pattern. Their ability to play both sides, to use the bookend powers of the Pacific Ocean as counterweights, may prove untenable if the there is a substantial slide in U.S.-China relations toward the negative. Few in the region are eager to choose sides, all are assessing their limited options, and the pervading hope is that somehow Washington and Beijing will continue their uneasy dance, leaving Asia-Pacific countries space enough to cheer both on.

LONDON – After the United Kingdom’s unexpected vote to leave the European Union and Donald Trump’s unexpected triumph in the US presidential election last year, you might imagine that Europe’s chancelleries have developed detailed contingency plans for a victory by the far-right National Front’s Marine Le Pen in France’s presidential election. You’d be wrong.

The thought of President Le Pen is so terrifying, it seems, posing such a threat to the future of Europe, that it remains for many a possibility they dare not entertain, much less plan for. But that threat is precisely why Europe must address seriously the possibility of her winning, however unlikely it may seem.

There is no doubt that, as President of France, Le Pen could do serious damage to the European project. She has positioned herself as the antithesis of German Chancellor Angela Merkel, and pledged to leave the EU’s border-free Schengen Area and the eurozone. As for the EU itself, she promises to follow in the UK’s footsteps, renegotiating the terms of her country’s membership, and then calling a referendum on the agreement. If the EU rejects the reforms Le Pen demands, she will campaign for a French exit.

But there would be important differences between Brexit and Frexit. Whereas many UK Euroskeptics envision a global Britain trading with the world, Le Pen wants to introduce protectionist policies. In lieu of openness, Le Pen – who now casts herself as a Gaullist – wants to deepen “great power” relations with Russia and the United States, as she focuses on defending “traditional” Christian values and fighting terror in the context of a multipolar world order.

To support those objectives, Le Pen promises to increase French defense spending to 3% of GDP (the NATO target is 2%), while making it clear to voters that none of that spending would support stabilization missions in Africa. In this sense, a Le Pen victory would amount to a rupture not just with the European mainstream, but also with France’s strategic orientation over the last few decades.

To be sure, opinion polls still favor the independent centrist Emmanuel Macron in a second-round run-off. But many fear that Macron’s supporters will not be as inspired as Le Pen’s to turn out to vote.

In fact, in recent months, Le Pen’s popular support has remained rather consistent, with her lead in opinion polls for the first round remaining stable, even as French politics is thrown into upheaval by scandal and mistrust. This perfect political storm has caused France’s two-party system to fragment into a four-party arrangement and has all but knocked the favorites out of the running, while leaving Le Pen largely unscathed.

The reasons for Le Pen’s rise have as much to do with her reinvention of the National Front as with the external political environment. She has managed to escape the extreme-right ghetto, with a grand strategy, shaped by her ally Florian Philippot, that aims to broaden the Front’s appeal to key groups that previously avoided it, especially civil servants, women, and Catholics.

As Philippot has advanced this plan, claiming that the National Front is “neither left nor right,” he has also been working to lay the groundwork for a Le Pen-led government. To this end, he is seeking to build a new political elite to serve in a National Front government and help overcome resistance to the party’s agenda from France’s “deep state.” And he has been exploring what the president can and cannot do – including calling referenda – without permission from parliament.

Compared to Le Pen and her team, Europe’s leaders seem woefully underprepared. Of course, with so many unknowns, there is a limit to the plans they can share publicly; indeed, at this stage, specific statements may even prove counterproductive. But that does not mean that EU leaders should simply warn that a Le Pen victory would spell the end of the EU and leave it at that.

Instead, EU leaders should be considering to what extent they would be able to work around a Le Pen presidency. Even if she wins, she will struggle to gain a parliamentary majority, meaning that she may well end up in what the French evocatively call cohabitation with a hostile parliament and prime minister. Would other EU leaders be able to form an informal coalition with those elements of the French government?

Europe’s leaders must also begin thinking about how they should respond to Le Pen’s request to renegotiate the terms of France’s EU membership, and to what extent they should resist her efforts to remove France from the rest of Europe. Should the European Commission develop its own plans for a French exit from the eurozone and Schengen?

There may even be a case for Europe’s leaders to facilitate France’s withdrawal from the EU, lest Le Pen attempt to dismantle the EU from within, by building alliances with the likes of Hungarian Prime Minister Viktor Orbán. It is certainly a possibility that must be considered.

To say that these are difficult questions is an understatement. But that is precisely the point: bringing them out into the open demonstrates just how disruptive Le Pen’s victory would be.

Indeed, from the EU’s perspective, a hostile president in France, the country of Jean Monnet, would be far more destructive than Brexit.

If we have learned one thing from the annus horribilis that was 2016, it should be that opinion polls are fallible. Rather than shut their eyes and hope that, this time, the pollsters are vindicated, the EU should prepare even for the worst-case scenario. Such plans may never have to be implemented, but Europe’s leaders should make them now, rather than wishing later that they had.

BERKELEY – Former US Treasury Secretary Larry Summers recently took exception to current US Treasury Secretary Steve Mnuchin’s views on “artificial intelligence” (AI) and related topics. The difference between the two seems to be, more than anything else, a matter of priorities and emphasis.

Mnuchin takes a narrow approach. He thinks that the problem of particular technologies called “artificial intelligence taking over American jobs” lies “far in the future.” And he seems to question the high stock-market valuations for “unicorns” – companies valued at or above $1 billion that have no record of producing revenues that would justify their supposed worth and no clear plan to do so.

Summers takes a broader view. He looks at the “impact of technology on jobs” generally, and considers the stock-market valuation for highly profitable technology companies such as Google and Apple to be more than fair.

I think that Summers is right about the optics of Mnuchin’s statements. A US treasury secretary should not answer questions narrowly, because people will extrapolate broader conclusions even from limited answers. The impact of information technology on employment is undoubtedly a major issue, but it is also not in society’s interest to discourage investment in high-tech companies.

On the other hand, I sympathize with Mnuchin’s effort to warn non-experts against routinely investing in castles in the sky. Although great technologies are worth the investment from a societal point of view, it is not so easy for a company to achieve sustained profitability. Presumably, a treasury secretary already has enough on his plate to have to worry about the rise of the machines.

In fact, it is profoundly unhelpful to stoke fears about robots, and to frame the issue as “artificial intelligence taking American jobs.” There are far more constructive areas for policymakers to direct their focus. If the government is properly fulfilling its duty to prevent a demand-shortfall depression, technological progress in a market economy need not impoverish unskilled workers.

This is especially true when value is derived from the work of human hands, or the work of things that human hands have made, rather than from scarce natural resources, as in the Middle Ages. Karl Marx was one of the smartest and most dedicated theorists on this topic, and even he could not consistently show that technological progress necessarily impoverishes unskilled workers.

Technological innovations make whatever is produced primarily by machines more useful, albeit with relatively fewer contributions from unskilled labor. But that by itself does not impoverish anyone. To do that, technological advances also have to make whatever is produced primarily by unskilled workers less useful. But this is rarely the case, because there is nothing keeping the relatively cheap machines used by unskilled workers in labor-intensive occupations from becoming more powerful. With more advanced tools, these workers can then produce more useful things.

Historically, there are relatively few cases in which technological progress, occurring within the context of a market economy, has directly impoverished unskilled workers. In these instances, machines caused the value of a good that was produced in a labor-intensive sector to fall sharply, by increasing the production of that good so much as to satisfy all potential consumers.

The canonical example of this phenomenon is textiles in eighteenth- and nineteenth-century India and Britain. New machines made the exact same products that handloom weavers had been making, but they did so on a massive scale. Owing to limited demand, consumers were no longer willing to pay for what handloom weavers were producing. The value of wares produced by this form of unskilled labor plummeted, but the prices of commodities that unskilled laborers bought did not.

The lesson from history is not that the robots should be stopped; it is that we will need to confront the social-engineering and political problem of maintaining a fair balance of relative incomes across society. Toward that end, our task becomes threefold.

First, we need to make sure that governments carry out their proper macroeconomic role, by maintaining a stable, low-unemployment economy so that markets can function properly. Second, we need to redistribute wealth to maintain a proper distribution of income. Our market economy should promote, rather than undermine, societal goals that correspond to our values and morals. Finally, workers must be educated and trained to use increasingly high-tech tools (especially in labor-intensive industries), so that they can make useful things for which there is still demand.

Sounding the alarm about “artificial intelligence taking American jobs” does nothing to bring such policies about. Mnuchin is right: the rise of the robots should not be on a treasury secretary’s radar.

The gold-mining stocks' usual volatility has proven outsized so far this year, spooking investors. A fast initial surge in a new upleg was soon fully reversed by a sharp major correction, which spawned much bearish sentiment. That combined with the great distraction from the Trumphoria stock-market rally has left gold stocks unloved and overlooked. But their outlook is very bullish, and major upside breakouts near.

It's hard to find bargains in today's extreme stock markets. They've been radically distorted by the post-election euphoria centered on universal hopes for big tax cuts soon. Nearly every sector has been bid up to dizzying valuations. Except gold stocks, which everyone still hates. They may very well be the last remaining contrarian sector in these crazy markets, and thus a great buying opportunity for smart traders.

Gold stocks have been left behind by the wild Trumphoria stock-market rally over the past 5 months. As of the middle of this week, the benchmark S&P 500 stock index is up 10.0% since Election Day. But the gold stocks as measured by their flagship HUI index are down 1.1% over that span. The gold stocks have really suffered since the election, which explains the stubbornly-bearish sentiment plaguing them today.But perspective is everything in the markets, and that post-election snapshot is very misleading. So far in 2017, the HUI has rallied 12.5% to easily best the S&P 500's 5.1% gain. And despite the post-election gold-stock carnage, the HUI still rocketed 64.0% higher in full-year 2016! That trounced the S&P 500's mere 9.5% gain. Gold stocks stealthily remain one of the top-performing sectors in all the stock markets.Their operating fundamentals are still strong and their usual big spring rally is already underway, which will likely yield big gains for contrarians. Yet virtually no one cares! With general-stock euphoria running rampant, there's little investment demand for gold. This unique asset is an anti-stock trade tending to move counter to stock markets. Few investors seek prudent portfolio diversification when complacency is stellar.Given the gold-mining stocks' blistering gains in the past, the current total lack of interest even among contrarians is stunning. But the record-shattering post-election Trumphoria stock-market rally has been exceedingly distracting. It's literally unprecedented on many fronts, bewitching investors into forgetting stock markets rise and fall. The resulting stocks-to-the-moon psychology has withered contrarian trading.

So gold-stock sentiment is absolutely dismal today, exceedingly bearish. I've been intensely studying and actively trading this sector for decades. That includes the last 17 years in the financial-newsletter business, where I'm blessed with tons of sentiment feedback via both e-mails and hard newsletter sales. Gold-stock psychology is so rotten today that it feels much like what I've witnessed at past major secular lows.That's crazy, as this week the HUI is still 103.6% higher from its last major secular low in January 2016. If any other sector in all the stock markets had doubled in less than 15 months, it would be celebrated and popular. Not gold stocks! While sentiment is ethereal and impossible to directly measure, there are all kinds of indicators implying how bad it is. One example is capital volume in the leading gold-stock ETF.

The world's most-popular gold-stock trading vehicle is the GDX VanEck Vectors Gold Miners ETF. As of this week, its net assets were running 52.6x larger than its next-largest 1x-long major-gold-miners-ETF competitor. So when investors and speculators are interested in gold stocks, that's naturally reflected in GDX trading activity. And it has just collapsed this year, reflecting waning interest in this contrarian sector.At best last year, GDX skyrocketed 151.2% higher in just 6.4 months! Such a volatile price range leaves normal raw daily trading volume much less comparable over time. So I prefer to use a simple construct called capital volumen. It multiplies the number of shares traded each day by that day's share Price. This effectively normalizes volume in price terms, revealing how much capital is moving in gold stocks via GDX.This chart looks at GDX capital volume over the past year and a quarter, which encompasses the mighty new bull market in gold stocks. GDX's share price in blue is superimposed over raw daily capital volume in red, which can vary wildly from day to day. So capital volume's 21-day moving average is included in yellow to smooth out this erratic data. Calendar months average 21 trading days, so it's a one-month smoothing.

A year ago in January, the gold stocks slumped to a fundamentally-absurd 13.5-year secular low in HUI terms. From those depths of despair, a major new gold-stock bull was born. While gold-stock sentiment isn't quite as epically bearish today as it was at that deep low, it's surprisingly not a whole heck of a lot better! As usual soon after prevailing sentiment waxes too bearish, gold stocks exploded higher in early 2016.Note above those massive gains evident in GDX were fueled by a massive surge in this leading sector ETF's capital volume. It nearly tripled from a practically-nonexistent $0.7b per day to $2.0b in 21dma terms, and then established a new high trading range. For the rest of 2016 after that, GDX's capital volume settled into that new bull trading range of $1.5b to $2.2b when smoothed using that one-month average.

This consistently-high capital volume reflected growing investor and speculator interest in this red-hot gold-stock sector. Capital generally migrates to where it is treated well, and the gold-mining stocks were providing fantastic stock-market-dominating returns. There were naturally healthy sharp selloffs from time to time to rebalance sentiment, which spiked volume. But even ex-selloffs, capital volume stayed high.

This strong new gold-stock bull was looking great all the way into late September. There was a major correction in late August, but gold stocks had subsequently been grinding higher for nearly 5 weeks. Sentiment remained fairly bullish after such an amazing early-bull run, until an unfortunate series of three low-probability selloffs totally changed how traders perceived gold stocks. Budding love turned to hate.Back in early October, the gold miners' stocks plummeted in a brutal and rare mass-stopping event that was driven by gold-futures stops being run. The gold stocks recovered sharply after that, but were yet again improbably slammed after Trump won the election. Before that election, gold had caught a bid every time Trump seemed to climb in the polls! But the resulting Trumphoria killed gold investment demand.

Then finally in mid-December gold stocks plunged yet again on a more-hawkish-than-expected Fed outlook for rate hikes in 2017. As this sector's strong recoveries after its major late-summer correction and that early-October mass stopping proved, traders' sentiment could weather a couple of heavy punches. But three in a row, four if that summer correction is counted, was too much to bear resulting in a knockout.So gold-stock interest increasingly waned on this exceedingly-unlikely and absurdly-unlucky series of improbable selling events. That was evident in the relentlessly-declining GDX capital volume. By late December at a major gold-stock low after GDX had cratered 39.4% in just over 4 months, this key ETF's capital volume had retreated all the way back to bull-trading-range support. That was merely $1.5b per day.As gold stocks rallied sharply out of those mid-December-2016 lows to begin a major new upleg, traders' interest should've recovered rapidly given this sector's market-leading performance last year. But after a couple weeks of capital volume mean reverting higher, it started slipping again. Even as the gold stocks kept rallying on balance between mid-January and early-February 2017, GDX capital volume collapsed.

Despite GDX soaring 34.6% in less than 2 months, which was far better than other sectors buoyed by all the Trumphoria, capital volume fell under its bull-market support. By late February it had crumbled below $1.3b on a 21dma basis! Those were the worst levels in a year, since the early weeks of gold stocks' young new bull when it still remained unproven. This week GDX capital volume slumped back near $1.3b.Investors and speculators simply aren't interested in gold stocks. This trend began in that crazy series of major selloffs since last summer, which is understandable. But to see it intensify despite a sharp gold-stock rally in early 2017 is unbelievable. Normally capital volume surges to drive a young new upleg like we saw in early 2016. But early this year capital volume continued to wane despite a strong new sector upleg.Again there's little doubt the Trumphoria is to blame. As the stock markets surged after the election on big-tax-cuts-soon hopes that look increasingly Pollyannaish, gold demand cratered. Stock investors and gold-futures speculators alike dumped gold at dizzying rates, hammering it and its miners' stocks way lower. With general stock markets hitting record after record and drenched in euphoria, no one wanted gold.

The resulting anomalously-bearish psychology has created an incredible opportunity. Sooner or later, these lofty stock markets will inevitably roll over into their long-overdue bear. That will quickly shock traders out of their zombified stocks-to-the-moon stupor. Once investors finally realize that this time isn't different despite the Trumphoria, gold investment demand for prudent portfolio diversification will surge again.That will entice back the missing-in-action gold-stock investors. As capital floods back into this starved sector, gold-stock prices will explode higher again. Always throughout all markets, excessively-bearish sentiment is a very-bullish omen. It indicates the sellers have already sold, leaving only buyers eager to return on the right catalyst. Bearish sentiment both births and fuels major new uplegs yielding massive gains.And gold stocks' technicals very much back this bullish outlook based on abnormally-bearish sentiment. This next chart shifts back to that flagship HUI gold-stock index, which is closely mirrored by GDX. The gold stocks are on the verge of a few major breakouts that will likely unleash serious buying. And that of course will quickly turn sentiment around, attracting in more traders which will accelerate this sector's gains..

Because the HUI has far less component stocks than GDX, this sector index's moves are bigger than that ETF's. In HUI terms the gold stocks nearly tripled in the first half of last year with a 182.2% gain! After such a rousing performance for a new bull's first upleg, traders should love this wealth-multiplying sector. But they largely gave up on it after that unfortunate series of improbable selloffs late last year.Those ultimately pummeled the HUI 42.5% lower in just over 4 months. Provocatively the gold stocks bottomed in mid-December the day after the Fed's second rate hike in 10.5 years. That simply mirrored and amplified gold's action, since gold's price is the overwhelmingly-dominant driver of gold-mining profits. Unfortunately gold's and thus gold-stocks' fortunes are heavily intertwined with Fed actions today.Gold-futures speculators, who wield outsized influence on gold prices, fervently believe higher interest rates spell doom for gold. This notion is supremely irrational though, as history proves gold thrives in Fed-rate-hike cycles! This metal's average gains during the exact spans of all 11 Fed-rate-hike cycles between 1971 and late 2015 ran 26.9%! That's an order of magnitude greater than the S&P 500's 2.8%.So it shouldn't be surprising the second upleg of gold stocks' young bull was born immediately after a hawkish Fed meeting in mid-December. The gold stocks surged dramatically into early February, albeit on abnormally-low volumen. Then this sector corrected sharply into early March. That correction was largely driven by fears of an imminent Fed rate hike, as futures-implied Fed-rate-hike odds were soaring.

The Fed won't risk surprising the markets with a rate hike and sparking major selloffs in both bonds and stocks. So it won't hike unless federal-funds futures imply 70%+ odds of a hike at any given meeting. Back in early February when the HUI hit upleg highs near 222, those odds for a mid-March hike were just 4%. But by the day the HUI bottomed in early March, those same odds had skyrocketed to a certain 91%!While gold stocks' 18.1% correction in a month was sharp, it wasn't unusual for this volatile sector. After that the gold stocks drifted near lows into the Fed's mid-March meeting. The Fed took advantage of the high rate-hike expectations to indeed hike. That finally confirmed a new rate-hike cycle is underway since December 2015, the 12th since 1971. Despite that irrationally-feared hike, gold and gold stocks surged.

The Fed officials' outlook for total rate hikes in 2017 stayed unchanged at three, contrary to expectations among traders it would climb to four. So gold blasted 1.9% higher on Fed-rate-hike day, which motivated traders to aggressively buy gold stocks. That catapulted the HUI up 7.8%, and confirmed a new uptrend channel for this bull's second upleg. Realize this entire gold-stock bull has happened within a rate-hike cycle!

From the day before its first rate hike in December 2015 to its third rate hike in March 2017, the HUI had soared 80.6% higher in just 15 months! That was driven by a parallel 15.1% gold rally over that same span. So this universal belief today that Fed rate hikes are bad news for gold and gold stocks is totally baseless. History, and even this current rate-hike cycle, prove the opposite. So don't fear Fed rate hikes!Since the gold stocks were jumpstarted on Fed Day a few weeks ago, they have mostly lingered around their key 50-day moving average. That's proven strong upper resistance for several weeks now. But just this week, the gold stocks as represented by the HUI finally managed to claw above this level. So it's not going to take much more rallying to drive a decisive 50dma breakout, which should ignite lots more buying.

Love or hate technical analysis, countless big traders including hedge funds carefully watch technicals as part of a holistic trading approach. So breakouts above key resistance levels usually lead to new buying and strengthening upside momentum.Â This imminent 50dma breakout is likely to easily carry the HUI up to its next major resistance at its 200dma. That had halted the gold stocks' advance twice in February.200-day moving averages are probably the most important in all of technical analysis. Stocks or sectors above their 200dmas are often considered to be in bulls, where buying begets more buying. So once the HUI decisively breaks above its 200dma again, even bigger funds are going to start chasing gold stocks. These professional traders will remember this sector's huge gains in 2016, and position for more this year.

All this will drive one more major breakout that will really help shift gold-stock psychology back to bullish again. Within a month or two after that 200dma breakout depending on how fast gold stocks rally, they will drag the HUI's 50dma back above its 200dma. That's known as a Golden Cross, which is one of the most powerful indicators in technical analysis. Traders see them as signs major new bull markets are underway.

So in addition to suffering exceedingly-bearish sentiment today which is actually super-bullish for this sector's near-term outlook, the gold stocks are on the verge of a series of major upside breakouts on the technical front. These two factors alone support aggressively buying gold stocks today ahead of this bull's second major upleg accelerating dramatically. But a couple more factors really amplify this bullishness.

Gold and gold stocks have long enjoyed strong spring rallies, heavy seasonal buying between roughly mid-March to early June. The potency of these seasonal tailwinds is much greater when sentiment and technicals are also bullish. This is really an exceptional setup for a major spring rally this year. Last year, the HUI blasted 34.9% higher in this spring-rally span! Similar outsized gains this year wouldn't be surprising.The gold miners remain strong fundamentally too, fully justifying big fund buying in the coming months. In Q4'16, the elite gold miners of GDX reported average all-in sustaining costs of $875 per ounce. That was far below prevailing average gold prices of $1218, yielding healthy profits. In Q1'17, gold's average price modestly started mean reverting higher to $1220. So gold-mining profitability is still strong and growing.

Thus the sentimental, technical, seasonal, and fundamental gold-stock stars are all aligned for a major acceleration of this young bull's second major upleg in the coming months. The smart investors and speculators are already positioned or buying now, before everyone else figures this out. By the time the gold stocks are much higher and excitement is mounting again, you'll be wishing you had bought in way earlier.

While investors and speculators alike can certainly play gold stocks' accelerating upleg with the major ETFs like GDX, the best gains by far will be won in individual gold stocks with superior fundamentals. Their upside will trounce the ETFs', which are burdened by over-diversification and underperforming gold stocks. A carefully-handpicked portfolio of elite gold and silver miners will generate much-greater wealth creation.

The bottom line is gold stocks are on the verge of major technical breakouts. The HUI is finally clawing over its 50dma after challenging it for weeks, with its 200dma now in its sights. Both breakouts should unleash big buying by technically-oriented funds. That coupled with abnormally-bearish sentiment as evidenced by very-low capital volume is exceptionally bullish for gold stocks over the coming months.

Mix in spring's seasonal tailwinds and gold miners' continuing strong operating fundamentals, and we have real potential for one heck of a bull-market upleg. Gold investment demand, and therefore capital flowing into gold stocks, will only grow as Trumphoria inevitably fades. As stock traders realize big tax cuts aren't coming soon, these euphoric stock markets will roll over rekindling interest in gold and its miners.

We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.